Income Tax Severed Letters - 2002-11-08

Principales Questions:
Le revenu net d'un enfant mineur doit-il inclure des revenus d'intérêts générés à partir de montants qui, à la base, ne sont pas imposables pour ce particulier?

Position Adoptée: Oui.

Principal Issues: Application of subsection 78(1) of the Act to an amount that was previously forgiven under section 80.

Position: Subsection 78(1) of the Act cannot apply to an amount that has been previously forgiven under section 80.

Reasons: Subsection 78(1) requires that the amount be "unpaid". An amount that is a forgiven amount under section 80 is "settled or extinguished" and therefore, cannot be considered unpaid within the context of subsection 78(1).

Principal Issues:

1. Can a Mortgage Investment Corporation for purposes of section 130.1 of the Act ("MIC"), invest in units of trusts that are Mutual Fund Trusts for the purposes of section 132 of the Act, without causing the corporation to lose its status as a MIC?
2. Can a MIC invest in units of a limited partnership that owns real property without causing the corporation to no longer qualify as a MIC?
3. Can a MIC hold real property that it has acquired by either purchase or foreclosure, without causing the corporation to no longer qualify as a MIC?

Position:

1. Generally yes.
2. Maybe. Will depend upon the relevant facts.
3. Generally yes.

Reasons:

Principale Question: Vous désirez savoir si les employés peuvent déduire de leur revenu aux fins du calcul de l'impôt sur le revenu les frais de déplacement qu'ils encourent pour se déplacer de la place d'affaires de l'employeur jusqu'aux différents chantiers et d'un chantier à un autre dans la situation où ces frais de déplacement, bien qu'à la charge de l'employeur selon la convention collective, ne sont pas remboursés par celui-ci.

Position Adoptée: Non

Principal Issues: Treatment of amount of 83(2) dividend in excess of CDA

Position: Non-taxable receipt; added to CDA of corporate shareholders

Reasons: the Act

Principal Issues: Request for reassessment of a corporate taxpayer after the expiry of the relevant normal reassessment period.

Position: Such a request should be directed to the relevant Tax Services Office. However, reassessment of a corporate taxpayer after the expiry of the relevant normal reassessment period can only be made under the circumstances specified in section 152 of the Act.

Reasons: Nature of the enquiry and a review of the relevant provisions of the Act. In particular, an application under subsection 152(4.2) of the Act is not available in the case of a taxpayer that is a corporation.

Principal Issues: Whether a deposit of serpentine constitutes a mineral resource.

Position: Yes.

Reasons: Natural Resources certified under subparagraph (d)(i) of the definition of "mineral resource" in subsection 248(1) of the Act in respect of the Lizardite (Serpentine).

Principal Issues:
Whether an amount identified in the financial statements is a loan or advance for the purpose of the investment allowance under subsection 181.2(4).

Position: Factual determination.

Reasons: Legal meaning of loan or advance.

Principales Questions:
Un employé loue un logement de son employeur à prix réduit. Après avoir obtenu l'approbation de son employeur, l'employé encourt des dépenses pour améliorer le logement qu'il occupe. La valeur de l'avantage imposable calculé en vertu de l'alinéa 6(1)a) de la Loi peut-elle être réduite d'un montant lequel représente les dépenses encourues par l'employé ou le temps consacré par l'employé à améliorer le logement?

Position Adoptée:
Les dépenses engagées par l'employé pour améliorer son logement qui ne sont pas dans le cadre de celles qui sont normalement assumées ou remboursées par un locateur ne devraient pas réduire la valeur de l'avantage calculé aux fins de l'alinéa 6(1)a) de la Loi.
Dans les cas où les dépenses engagées par l'employé sont des dépenses qui sont normalement à la charge d'un locateur, le montant de cet avantage pourrait être réduit d'un montant raisonnable lequel représente les déboursés faits par l'employé pour des travaux relatifs à son logement et qui bénéficient principalement à l'employeur/locateur.

Principal Issues: Employees (they do not receive any travel allowances) work at XXXXXXXXXX at a number of different work sites in XXXXXXXXXX . An employee may work at a work site from two to three weeks to three or four months. Are the employees entitled to claim travel expenses under paragraph 8(1)(h.1) of the Income Tax Act in travelling between their residences and the XXXXXXXXXX ?

Position: On the basis of documents in our file, general comments were provided to the effect that travel expenses could not likely be claimed.

Reasons: Documents in our files and court cases.

Principal Issues: Whether amounts assessed and/or reassessed under the Excise Tax Act, including penalties and interest, are deductible in computing income for income tax purposes.

Position: Question of fact.

Reasons:
--- If in respect of a capital property, GST assessed is part of the cost of the capital property.
--- If incurred for the purpose of gaining or producing income, GST is deductible in computing income.
--- For penalties, must meet the criteria set out in 65302 BC Ltd. v. HMQ to be deductible in computing income.
--- Interest paid on late or deficient payments of GST that relate to a business or property will be deductible.
--- IC 77-11 applies to GST reassessments.

Principal Issues: Ordering of windings-up in a corporate chain. Does the order of the windings-up affect the availability of the bump?

Position: Yes it can.

Reasons: The law. The property of the subsidiary to be bumped by the parent must, among other requirements, have been continuously owned by the particular subsidiary without interruption since the parent last acquired control of the subsidiary.

Principal Issues: In a given fact situation, whether an amount payable/paid by a former employer to a former employee in respect of the loss of an office or employment, pursuant to a settlement agreement for a wrongful dismissal claim is:

(1) A retiring allowance, pursuant to 248(1), for the purpose of tax withholding under 153(1)(c), if the amount payable is determined according to the purchase cost of a specific type of property (computer) up to a pre-determined amount ?
(2) In determining the amount of the payment made by a former employer to a former employee under 103(4) of the Regulations, to be computed net of the amount of the overpayment of employment insurance benefits to the former employee that the former employer must withhold from the retiring allowance payment and remit directly to the receiver general ?

Position: (1) Probably yes. (2) No.

Reasons: (1) The amount paid for the purchase a computer could be considered in respect of a retiring allowance since it appears that the employee received the amount in respect of the loss of his/her office or employment.
(2) IT-337R3 number 11 - an amount paid in respect of a retiring allowance constitutes income of the employee regardless of who actually receives the payment. The conditions set-out in Markman vs. M.N.R. (89 DTC 253) [reiterated in Kant v. H.M.Q., 2001 DTC 3732] to apply the constructive receipt doctrine are met such that the payment made to the receiver general out of the retiring allowance is constructively received by the former employee and considered made to the former employee in respect of the former employee's retiring allowance.

Principal Issues: In a given fact situation, whether a property
could be included in Class 10 of Schedule II of the Income Tax
Regulations.

Position: Part Class 10 and part Class 8.

Reasons: CCRA's position in IT-285R2 on the meaning of the expression
"automotive equipment" in paragraph (a) of Class 10 and CCRA's position
in IT-317R on the meaning of the expression "radiocommunication" in
paragraph (j) of Class 8.